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Determine a present value factor for an annuity

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Reference no: EM132571901

The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life.

Question a. Determine a present value factor for an annuity of $1, which can be used in determining the internal rate of return. Carry your answer out to three decimal places.

Question b. Based on the factor determined in (a) and the portion of the present value of an annuity of $1 table presented below, determine the internal rate of return for the proposal.

Year              10%           15%           20%
1                 0.909         0.870         0.833
2                 1.336            1.626       1.528
3                2.487             2.283         2.106
4               3.170              2.855         2.589
5               3.791                 3.353        2.991
6                 4.355                 3.785       3.326
7                 4.868                4.160        3.605

Reference no: EM132571901

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